Truce in China-US Trade War

After US President Donald Trump unilaterally announced on Twitter New Year’s Eve day, “I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15,” the South China Morning Star (SCMS) reported that the Chinese delegation to be led by Vice Premier Liu He decided to revise their travel plans to fit this new schedule.

While no official announcement has yet to be made, the Chinese, who were to travel to Washington to sign the deal during the first week of January, are now expected to arrive on 13 January and return on 16 January, and while Trump also tweeted, “At a later date I will be going to Beijing where talks will begin on Phase Two!”, the Chinese have remained silent about any invitation for an official state visit by the president.

This agreement comes after very difficult back-and-forth negotiations over the past 19 months since Trump initiated the trade war and each country raised tariffs tit for tat during this time.

On 7 February 2018, the first tariffs announced by the US as a ‘global safeguard’ placed a 30 percent tax on all solar panel imports except from Canada, which was worth USD8.5 billion, and a 20 percent tax on washing machine imports, worth USD1.8 billion. After that they went after steel and aluminium imports imposing tariffs of 25 and 10 percent respectively, except on Argentina, Australia, Brazil and South Korea.

China then retaliated by announcing a 178.6 percent anti-dumping duty on imports of sorghum from the US.

By 13 December 2019 when the Phase One agreement was reached, total US tariffs imposed on only Chinese goods had reached a value of USD550 billion while the China tariffs on American products were worth USD185 billion.

While full terms of the 86-page agreement have not been revealed as they say it is still being translated, it is expected that the US has agreed not to impose new tariffs on USD160 billion of Chinese imports such as smartphones and toys. In return, China says it will buy more US farming products and make fresh commitments to improve intellectual property protections.

When announcing the agreement, the US said they see farm purchases made by China growing by USD40 billion annually over two years while their food, energy, manufactured goods and services exported to China should increase by USD200 billion.

However, there are concerns as the agreement is said to remain vague as to exactly what China has agreed to buy and on what timeline. They say purchase commitments are being left out to protect commodity markets.

The next question is when negotiations on Phase Two will be initiated. President Trump is, of course, presenting this as a win to gain political advantage for his reelection campaign. China, on the other hand, is remaining somewhat quiet, just happy to avoid additional tariffs.

There are experts who question whether this agreement will resolve the long-running tensions between the US and China.

Shehzad Qazi, of the economic observatory China Beige Book, said, “The deal will ultimately be weighed in terms of how much it does to address structural issues like intellectual property and market access.

“The push for financial decoupling and, of course, the larger technological competition are also all here to stay. Trump’s trade war may have been the opening salvo of a long drawn conflict.”